Linkages Workshop November 14/

Outline Alberta context Regulatory framework Compliance options Carbon connections

Provincial Economy Fossil-fuel Value-Add Focused –Resource extraction, upgrading and transport –Oil sands growing as a major source of secure energy –Driver of economic and emissions growth (oil sands, upgrading) Thermal-based electricity –Coal at 60% generation –Growing wind generation (400% since 2000) Disbursed population –Limited but growing concentration in a few urban areas Transportation accounts for 15% of total greenhouse gas emissions 100 large point source facilities account for about 50% of total emissions Ideal geology for carbon sequestration

Business As Usual Projections (average estimate) 305 MT 2004 Emissions: 235 MT Alberta’s Emissions (Million Tonnes of CO2 Equivalent) 1990 Emissions: 168 MT Share of Emissions Associated with Energy Exports

Alberta Approach Long term issue –Need to start with practical, achievable objectives Policy certainty for industry –Large investments being made now – expensive to retrofit, investment is for 40 years+ Implementation of new technology will be a big part of the long-term solution. –Linked to our unique role as North America’s energy supplier Market instruments are needed to bridge the gap between current emissions and long-term solutions. Consumers must be part of the solution Requires strategic and focused investment in transformational changes (technology, behavioral, etc.)

Alberta Mitigation Options Send Price Signal Trading Mechanisms to Bridge Technology Application

Specified Gas Emitters Regulation Under the Climate Change and Emissions Management Act passed in 2003 Applies to all facilities in Alberta that release over 100,000 tonnes of CO 2 e –Facilities have been reporting since 2003 Reduction targets off of baseline –Emissions/production=baseline intensity –12% reduction off of baseline (adjusted targets for new facilities) For facilities that are not increasing production (majority) – intensity target = absolute Emphasis is on the price signal

Emission Performance Credits –These are credits for better than target performance Fund Credits –Invest in the Climate Change and Emissions Management Fund at $15/tonne – funds used to develop or invest in Alberta based technologies, programs, and other priority areas Emission Offsets –Action (project) must be taken in Alberta on or after January 1, 2002 –Not otherwise required by law –Must be verified by 3 rd party Options to Achieve Targets

The Carbon Market Total potential carbon demand is about million tonnes annually Focus of the system is on compliance – carbon as a commodity secondary –Third party verification not government issuance of credits –Government to audit at back-end Performance credits based on verified compliance reports Offset Credits created based on verification of emission reductions using government approved protocols –15 approved thus far Deals being done through bilateral contracts / over the counter Registry being finalized for posting of key project information Growing interest in carbon exchanges

Carbon Connections Overarching framework less critical to linkages than the ‘carbon foundation’ Framework outlines how a tonne fits to meet regulatory objectives Technical level is where the tonne is created –For both ex-ante and ex-poste Need common weights and measures at the foundational level –Industry reporting –Offset protocols –Verification / Assurance Linkages should be tied to the policy context –Will best inform how systems can bridge A coherent international market will evolve, not simply occur There is a paradigm shift in moving from exploring to implementing